Although activation of CD4(+) T cells mediates pathogenesis in Leishmania amazonensis (La)-infected mice, these susceptible mice do not develop a polarized Th2 response, suggesting a unique mechanism of disease susceptibility. To understand how Th cell activities are regulated, we examined the frequency and phenotypes of regulatory T (Treg) cells. At 1-3 wk of infection, relatively high percentages of CD4(+)CD25(+)CD86(+) T cells, as well as high levels of FoxP3, TGF-beta1, and IL-10RI transcripts, were detected in the skin and draining lymph nodes, indicating local accumulation of Treg cells. Lesion-derived, IL-10-producing CD4(+)CD25(+) cells effectively suppressed proliferation and cytokine (IL-2 and IFN-gamma) production of CD4(+)CD25(-) effector cells. Adoptive transfer of lesion-derived CD4(+)CD25(+) cells to syngeneic, naive C57BL/6 mice before infection significantly reduced disease development. To further validate the beneficial role of Treg cells in La infection, we adoptively transferred CD25(+) T cell-depleted splenocytes (derived from naive mice) into RAG1(-/-) mice. This transfer rendered RAG1(-/-) mice more susceptible to La infection than the mice receiving control splenocytes. The beneficial effect of Treg cells was transitory and correlated with decreased activation of IFN-gamma-producing effector T cells. This study uncovers an intriguing role of Treg cells in restraining pathogenic responses during nonhealing Leishmania infection and emphasizes a balance between Treg and Th1-like effector cells in determining the outcome of New World cutaneous leishmaniasis.